With annual returns in excess of 35% for over a decade from top quartile funds, venture capital (VC) has long been recognised as a top performing asset class, yet remains out of reach for most private investors. The best VC funds are only accessible to the
minority of investors capable of writing cheques in excess of £1m+ (with some funds demanding £10m+), and therefore able to get a slice of the exclusive pie.
With more mainstream asset classes such as public markets becoming increasingly volatile, in addition to high inflation and the ongoing cost-of-living crisis, private investors are considering their options.
Creating a diverse portfolio that can potentially deliver outsized returns is a priority for a growing number of private investors. VC can now be part of this solution.
Creating a diverse investment portfolio
Sophisticated investors have often looked to venture capital as somewhere to allocate a significant portion of their funds; though for practical reasons a high monetary threshold exists.
As it stands, eligibility to invest in VC funds means qualifying as a Professional Investor, a High Net Worth Individual (e.g. earning over a certain threshold – usually £100k – or have assets outside their primary residence above £250k), or a Sophisticated
Investors (e.g. working in finance and be actively investing in some capacity).
Whilst many investors meet the criteria, top VC funds tend to look for investment amounts beyond what most investors are capable of. As a result, they remain excluded despite being highly motivated and serious about gaining access.
For a long time, private investors have been limited to traditional products that are ultimately linked to the stock market such as pensions and ISAs. Consequently, public equities hold the key to success. These investors want to diversify their portfolios
to distribute risk, but options are limited.
Adventurous investors in search of high returns may opt for experimental assets such as cryptocurrency or NFTs, but these are largely unproven and almost certainly volatile.
Investors must ask themselves whether these assets have a place in a sophisticated investment portfolio, especially compared to established, high-performing asset classes such as venture capital that are now in their reach. It’s clear why those who can invest
in VC, do – making it accessible to more investors is only fair.
By unlocking access to VC funds, both the funds themselves and private investors stand to benefit.
By enabling private investors to access VC, funds will access a new pool of capital, raising and deploying more into the stars of tomorrow. This new wave of investors brings a wealth of industry knowledge, diverse backgrounds and fresh perspectives.
VC funds enable private investors to access a high-performing asset class, and also offer insight into the technologies and start-ups shaping the future. Having previously been limited to investing in the stock market, this should excite and motivate private
Investing in the future
The current economic situation creates uncertainty across mainstream asset classes. Many investors are shifting towards longer-term thinking, making traditional VC fund strategies an appealing option.
Sprout unlocks access to top-tier VC funds; everyone stands to benefit, whether an individual, fund, or other businesses in the VC ecosystem.
Subject to eligibility. Capital at risk.